Capital Ethiopia Newspaper

‘Highland’ bottlers close shop

Two hundred laid off
Apex Bottling Company, producer of the first bottled water, Highland Springs, appealed to Sufian Ahmed, minister of Finance and Economic Development (MoFED) last week for its enormous debt to be cancelled. The company shut down its factory as of Thursday January 12 unable to obtain a renewal of its business license from the Ministry of Trade.
The pioneer bottler has been entangled in a controversy with the Ethiopian Revenue and Customs Authority (ERCA) since 2009, the latter claiming 60 million birr  excise tax arrears. The company was unable to renew its license that expired on Monday January 9, since it did not obtain clearance from ERCA.  Apex is said to owe 29 million birr in taxes, but the fines and interest calculation has caused the total amount claimed by ERCA to double.
In the past two years, Apex appealed the case to concerned government offices including to Prime Minister Meles Zenawi requesting debt cancellation but their efforts were unsuccessful. And a few days ago the company appealed to MoFED. Minister Sufian is said to have directed the letter to the legal department  for assessment and opinion and is to submit the appeal to the Council of Ministers for final decision.
According to Hirut Melese, Legal Advisor of Apex, they are awaiting the decision of MoFED’s legal head, but that person is out of the country for the next two weeks.  “We submitted a letter to the Ministry office a few days ago. Now we are forced to lay people off,” Hirut said.
The company officially laid off its employees’ on Thursday January 12, 2012 when all its attempt to survive from ERCA’s excise tax claim failed.
“If we continue our production without renewing our license it will be illegal, so the only option we have is to lay off our employees and close the company down,” Hirut told Capital.
Apex Bottling has over 200 employees excluding temporary staff.
She explained that the company had requested that MoFED writes to the Ministry of Trade to enable them get the renewal, but the ministry office did not accept the request.
Apex had also requested ERCA earlier in the week to allow the company to renew its license. “They told us that if the company owners promise to pay the debt within one month, the authority would allow renewal of the license,” she explained.
In 2009 the authority sent a letter to all bottling companies claiming three year’s worth of excise tax dues, which, they said, should be calculated based on their packaging costs. 
However, Apex Bottling rejected the bill, while other bottling companies agreed to pay the tax in installments. 
The authority’s law allows taxpayers to appeal against the authority’s claim, but taxpayers are required to pay 50 percent of the claim before the authority’s committee can investigate the complaint.
Apex instead took the case to the Federal High Court which ruled in favor of the authority. The company further appealed the case to the Supreme Court, which again upheld the decision. 
Apex and the authority have divergent views as to whether packaging costs should be considered production costs. If packaging is considered part of production cost then excise tax will be levied on it.
“We understand that packaging costs are not production costs,” the legal advisor said.
“Production cost is something you incur that brings substantial alteration to the product but the authority rejected our claim.”
ERCA claimed from Apex Bottling 29 million birr excise tax dues accumulated until 2007/08, but its dues has risen since then.
The authority had claimed excise tax arrears from seven bottling companies in 2009. Among them, it claimed eight million birr from Burayu Spring Water Plc that produces Aqua Addis; four million birr from Debre Birhan Natural Spring Water Plc producer of Aqua Safe; and another four million birr from TGDM Trade Works Plc producer of Real Water. Apex owed the highest amount. 
Michael Berhane, major shareholder of Apex Bottling declined to comment about the issue.
Apex Bottling Company was established in 1999 by Ermias Tekil Amelga, founder of several businesses in the country including Zemen Bank. The company was first in Ethiopia to produce bottled mineral water and also the first to launch sugar free soft drink, RC Energy Cola, nine years ago.